Iona shares

Iona shares

What has happened with Iona? Some months ago you responded to a writer who bought shares at $60 each and went overseas for three years only to be surprised upon their return that the shares had changed value sharply. You implied this was very foolish.

I did not go overseas and also bought shares when they were $50. Like many others, I bought them for my grandchildren, and three leading stockbroker companies advised they were a "strong buy" and "minimal risk".

On the day they dropped $17 per share on the Nasdaq, they were listed as a "strong buy" by those same companies. I have followed my investment every day for five years, made numerous calls to the three stockbrokerages - two here and one in New York - and every broker always said to hold on.Now they are $1.50 a share but the salary of the company's bosses alone has risen to 529,375 in 2002 as reported in your paper last month. Do we have any legal redress to appeal against the obvious withholding of information over the years? If the technology market is so bad, how are so many directors getting such obscene salary rises? Is accountability requested in Irish law?

Mr. P.G., Dublin

At the outset, it is important to make clear that there is no question of "obvious withholding of information" by Iona over the years. If there was any hint of it, you can be sure that in the current climate it would be investigated by the US authorities to say nothing about the Irish regulatory authorities.

Iona has been a disappointment, no doubt. In this, it sits among a whole cadre of technology companies that rode the wave of unrealistic expectations in the late 1990s and have since paid a very heavy price. Iona gets more attention than most other Irish technology groups because (a) it was the darling of the sector at the time and (b) it has managed to survive unlike some other highly touted companies.

You have two issues - the brokers and executive pay - and both are contentious issues just now.

It seems quite clear that certain brokers either accepted without question the very optimistic outlooks given by technology companies or succumbed to pressure in the bull market not to be seen as out of step.

It was and is still true that it is very difficult to find brokers with sell recommendations, although the mood in a tainted research industry has sobered considerably - especially in the US where so many investment banks are paying a high price for actions that saw them use research not as information for the investor but as a tool to generate more business for their parent banks. However, legal redress here would require you to prove either such a link in Irish research or some negligence.

On the pay side, executive pay is finally getting the attention it deserves. While firms from GlaxoSmithKline to Iona and others will argue that they cannot attract the expertise they require to lead their companies to recovery and/or growth, shareholders have every right to be disgruntled at some of the packages on offer.

As to tackling it, that is down to you, the shareholders, at a.g.ms. Institutional shareholders have been slow to act and many small investors have no voice because their shares are held electronically by the brokers. This has to change, especially the second element. There is an alternative, Crest accounts, that allow individual investors more rights and access to information. For some reason the brokers don't like it. My advice would be find one that will provide such accounts. After all, money talks.

Irish Nationwide

I took out a mortgage with the Irish Nationwide in September 2002. It was fixed for six months. Now that the fixed rate is up, I want a variable rate. I have been told in writing that the variable rate is 4.48 per cent. This seems very high to me. It is far higher than any rate quoted in your mortgage rates table. I have queried it with the head office which insists this is the best rate available.

I see from the mortgage tables that the Irish Nationwide variable rate is 4 per cent. Was there not some commotion at the a.g.m. recently when they said they had introduced the same rate for all borrowers on variable rates? The Irish Nationwide seems to be attracting new borrowers with competitive rates and then pushing up the rates when they get them in the door?

Mr D.K., e-mail

If Irish Nationwide is offering 4.48 per cent as its best variable rate, the society is not much interested in holding on to its customers. It may, however, be that certain staff at the society are struggling to keep up with developments at the society.

While most of the headlines following the recent a.g.m. concentrated on managing director Mr Michael Fingleton winning a vote of confidence, there was also a motion on the subject of variable rates. Like the motion of confidence, this passed - bringing to an end the practice of the society tailoring variable rates to individual customers, their requirements and their credit ratings.

As I understand, it provided for the same variable rates being offered to all borrowers who had taken out loans with the society since January 1st, 2002. You appear to fall comfortably within this group. You are also right when you say that the current, quoted variable rate for new business is 4 per cent APR. There is nothing to stop lenders offering discounted rates to any group, including new borrowers, but the a.g.m. motion would seem to preclude that action in the case of Irish Nationwide. An Irish Nationwide spokesman has offered to check out your case and, if you contact me with a phone number, I will be happy to pass you on to him.

SSIAs

Never stand in the way of expertise, I believe, and when it comes to the mathematical intricacies of working out the 8.9 per cent said to be the real rate applicable to the contributions of savers and the Government over the whole period of the Special Savings Incentive Scheme, I am no expert. Mr G.R., however, is an MBA who has grappled with the figures.

Imagine, he says, you want to save up to have 7,500 at the end of five years. How much do you need to save monthly? If the interest rate was 0 per cent, you would have to put by €125 per month as 60 x 125 = €7,500. If the rate was 8.785 per cent exactly, you would need to save exactly 100 per month. Thus you would save a total of 6,000 and €1,500 would accumulate in interest - exactly a 25 per cent top-up - reaching the target of 7,500. So, the Government top-up of 25 per cent towards the final value is 8.785 per cent or about 8.8 per cent (not 8.9 per cent) return on the investment, without adding the extra rate given by the lending institution. My thanks to him.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or email to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.